Private Credit: CFO Growth and Performance

Collateralized fund obligations (CFO) are specialized financial vehicles collateralized by the cash flows from a diversified pool of private capital assets—primarily limited partner (LP) interests and sometimes co-investments or secondary market fund positions—in multiple private capital funds. They are typically structured as special-purpose vehicles (SPV) that issue one or more debt tranches alongside an equity tranche, attracting fixed-income investors with varying risk-return preferences. Although CFOs have been in existence since the early 2000s, issuance has picked up significantly in recent years. Between 2018 and 2024, KBRA assigned ratings to 152 tranches in 67 CFOs, totaling approximately $37.7 billion of issuance, which included $28.5 billion of rated debt with the remainder in equity or unrated debt. In addition to CFOs, KBRA has assigned ratings to over 230 tranches of rated notes issued by more than 115 feeder funds that invest in middle market corporate credit,…